The package of measures for Small and Medium Enterprises (SMEs) announced by the Government this week is of course welcome, but it is hard to see how it will make a significant impact given the scale and nature of the problems facing the sector.
SME insolvencies accounted for 85 per cent of the total recorded in the first three months of this year, according to accountants PwC. The situation is particularly grave in the hospitality and retail sectors, which accounted for four out of every 10 insolvencies during the period.
The PwC numbers chime with anecdotal evidence of a large number of pubs and restaurants closing since the start of the year. But the numbers do not capture the many small businesses that are currently teetering on the edge of insolvency or those that decided to shut up shop before they went bankrupt.
These businesses are the target of the Government’s plan, the centrepiece of which is to allow them claim up to €10,000 back against their commercial rates. There are also grants for innovation and energy efficiency. On their own these measures are unlikely to constitute a lifeline for small businesses on the precipice, not least because of the time it takes for the money to come through.
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The measures will give some additional headroom to SMEs that are struggling but remain fundamentally viable. Likewise, other measures such as raising the threshold for the lower rate of employers’ PRSI and possibly delaying the introduction of additional statutory sick days and increases in the minimum wage would help, though they would have a cost to the employees affected.
What will ultimately decide the fate of struggling SMEs is the extent to which the Government tackles the issues facing all businesses of which energy, inflation and the cost of labour are the biggest challenges. Energy prices and inflation would appear to be heading in the right direction, but labour costs remain high as workers grapple with the cost of living and the shortage of affordable accommodation.